Do January stock market results foreshadow the rest of the year? | Making Sense with Ed Butowsky

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Hi this is Ed Butowsky with Making Sense. Each week we take the top three headlines that we think you might have missed and talk about them and explain what you should do with your money and your portfolio as a result, so here we go. 

For some reason historically the month of January dictates how stocks move the rest of the year, especially small cap stocks. Historically this month has been very strong for smaller companies that had weak performance the year before. These weaker performing stocks came as a result most likely because of tax loss harvesting in the months of November and December and also window dressing that has been done by hedge fund managers and portfolio managers of mutual funds to lock in their gains or their losses. But that’s why you have to look at the month of January and decide if in fact you’re going to see prices rise in January you could see that the rest of the year. Now sadly the last couple of years this hasn’t been true, but you have to look and see historically this has worked out so it might be a good time to buy smaller companies in the month of January.

Gold prices drive me crazy, they go up and they go down and people talk about it all the time. As you can see in this article, this one analyst is suggesting it’s going to go to $2,100. But with weakness and in the dollar and inflationary pressures you could see gold rise and geopolitical tensions between military powers could drive prices up even higher so there’s a lot of reasons to be looking at gold right now and if you’re going to do it you might look at GLD which is an ETF of gold spot prices.

2021 was like no other year in the housing market we’ve ever seen. We saw so much money flooding into new homes and existing home purchases that pushed the prices of houses up over 20 percent nationally. Now with interest rates remaining relatively low, although they could go higher but they’re still low right now, you’re going to continue to see money flood into housing and you’re going to see housing stocks most likely go a lot higher from here.

2021 you saw a rise of about 20 percent around the country but the national association realtors predict that will climb about 5.7 percent in 2022, still a very good number but not quite what you saw last year. Now stock prices have already baked this in so don’t think that stocks are going to go down in the housing sector because you’re going to see a decline from 2021 to 2022. You should buy an ETF of building and construction companies and also look at lumber as well because lumber is still going to be in high demand especially with inflationary pressures so I would not run away from the housing market but I’d be very conscious of the housing market being not as strong as it was in 2021.

This has been Ed Butowsky with Making Sense. If you want a complimentary portfolio evaluation please visit  www.edbutowsky.com or www.chapwoodinvestments.com, We do a very good job analyzing existing holdings and telling you if what you have is what you need. 

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